Costco Wholesale Corporation reported that net sales for the 16-week fourth quarter ended August 28 increased 10% to $16.36 billion from $14.83 billion in the year-ago period. Comparable warehouse sales during the fourth quarter increased 7% versus last year.
Net sales for fiscal 2005, the 52 weeks ended August 28, 2005, were $51.86 billion, an increase of 10% from $47.15 billion during the prior 52-week fiscal year ended August 29, 2004. Comparable warehouse sales increased 7% over the comparable 52-week period of fiscal 2004.
Net income for the 16-week fourth quarter increased to $354.7 million, or $0.73 per diluted share, from $296.8 million, or $.62 per diluted share, during the 16-week fourth quarter of fiscal 2004, representing an 18% increase in earnings per share. Net income during the quarter was positively impacted by lower income tax expense, reflecting a tax benefit recorded with respect to unremitted earnings (of approximately $0.04 per diluted share), and lower state tax expense (of approximately $.03 per diluted share), resulting in a tax rate of 28.90% for the quarter compared to 37.00% in the fourth quarter of the prior fiscal year. Excluding these items, the Company estimates its “normalized” fourth quarter tax rate would have been 35.8%, and its net income would have been $320.2 million, or $0.66 per diluted share.
Net income for fiscal 2005 increased to $1,063.1 million, or $2.18 per diluted share, from $882.4 million, or $1.85 per diluted share during fiscal year 2004, representing an 18% increase in earnings per share. Net income during fiscal 2005 was impacted by two non-recurring items previously reported concerning the second quarter: a $52.1 million income tax benefit (covering the years 1996-2003) resulting primarily from the settlement of a transfer pricing dispute between the United States and Canada; and a cumulative pre-tax, non-cash charge to preopening expenses of $16.0 million related to an adjustment of the Company's method of accounting for leases (entered into over the past twenty years). Exclusive of these items and the tax benefit with respect to unremitted earnings recorded in the fourth quarter, net income for fiscal 2005 would have been $998.3 million or $2.04 per diluted share, a 10% increase in earnings per share over the prior fiscal year.
Costco also reported net sales of $5.14 billion for the month of September, five weeks ended October 2, 2005, an increase of 13% from $4.53 billion in the same five-week period last year. Comparable sales increased 11% during this five-week period (10% domestically and 13% internationally). The U.S. figure includes the benefit from significant recent gasoline price inflation, with the average sales price per gallon of gasoline up 47% year-over-year in the month of September. Excluding gasoline price inflation, U.S. comparable sales in September would have been 8%.
The company also announced that its Board of Directors authorized an additional stock repurchase program of up to $1 billion of Costco Common Stock. This is in addition to the previously approved $500 million stock repurchase program, under which approximately $413 million has been expended to date, repurchasing 9.2 million shares of stock at an average cost of $44.87 per share. Under these programs the Company may repurchase shares at any time in the open market or in private transactions as market conditions warrant. The Company expects to fund stock purchases from cash and cash equivalents and short-term investments on hand.
